Extending Financial Inclusion in Africa

Extending Financial Inclusion in Africa

Editor

Daniel Makina

Professor of Finance, University of South Africa, Pretoria, South Africa

Table of Contents

Cover image

Title page

Copyright

List of contributors

Section 1. Introduction

1. An Overview of Financial Services Access and Usage in Africa

1. Introduction

2. The State of Financial Inclusion at a Glance

3. Africa's Institutional Environment

4. Organization of the Book

Section 2. Evolution Of Financial Markets And Institutions

2. How Did Banks Evolve in Africa?

1. Introduction

2. Financial Institutions in Pre-Colonial Africa

3. Colonial Demarcation of Africa and Financial Institutions

4. Financial Institutions in Post-Colonial Africa

5. Commercial Bank Access Four Decades Post-Colonial

6. Looking Ahead

3. Financial Development in Africa: Is It Demand-Following or Supply-Leading?

1. Introduction

2. Empirical Literature Review

3. Estimation Techniques and Empirical Analysis

4. Conclusion

4. The Role of Financial Markets and Institutions in Private Sector Development in Africa

1. Introduction

2. Overview of Private Sector Development in Africa

3. Driving Private Sector Development: The Role of Financial Markets and Institutions

4. Challenges and Opportunities in Extending Financial Inclusion

Section 3. Geography Of Financial Markets And Institutions

5. Financial Markets and Institutions in Africa: Landscape and Financial Inclusion

1. Introduction

2. An Overview of the Financial Sector

3. The Banking Sector

4. The Pension Sector

5. The Insurance Sector

6. Capital Markets

7. Conclusion

6. A Survey of Microfinance Institutions and Informal Finance in Africa

1. Introduction

2. Microfinance Paradigms

3. The Evolution of Microfinance in Africa

4. Microfinance Interest Rate Ceilings

5. Regulation of Microfinance Institutions

6. Technology-Aided Microfinance

7. Microinsurance

8. The Informal Financial Sector

9. Looking Ahead

7. Financial Sector Regulation and Governance in Africa

1. Background

2. Landscape of Financial Regulations and Governance of Financial Institutions in Africa

3. Conclusion

Section 4. Empirical Evidence Focusing On Africa

8. Macroeconomic Determinants of Financial Inclusion: Evidence Using Dynamic Panel Data Analysis

1. Introduction

2. Theoretical and Empirical Literature Review

3. Empirical Strategy

4. Results and Discussion

5. Conclusion

Appendix 8.1: Determinants of Number of Depositors at Commercial Banks per 1000 Adults

Appendix 8.2: Determinants of Commercial Bank Branches per 100,000 Adults

Appendix 8.3: Determinants of Credit to the Private Sector

9. Financial Inclusion and Economic Growth: Evidence From a Panel of Selected African Countries

1. Introduction

2. Literature Review

3. Empirical Strategy

4. Results and Discussion

5. Concluding Remarks

10. The Relationship Between Technology and Financial Inclusion: Cross-Sectional Evidence

1. Introduction

2. Key Issues and Empirical Evidence

3. Empirical Strategy

4. Empirical Results

5. Concluding Remarks

11. Unintended Consequences of Financial Inclusion

1. Introduction

2. Literature Review

3. Case Studies of Adverse Effects of Financial Inclusion

4. Research Methodology

5. Results and Discussion

6. Conclusions and Policy Implications

Section 5. The Trajectory Of Future Developments

12. Financial Inclusion and the Sustainable Development Goals

1. Introduction

2. Contrasting Perspectives on Poverty and Financial Inclusion

3. Potential Contributions of Financial Inclusion to the SDGs

4. Financial Inclusion Policies and Strategies

5. Some Unresolved Issues and Implications for Future Research

6. Conclusions

13. Alternative Financing Approaches and Regulation in Africa

1. The Rise in Mobile Financial Services in Africa

2. Crowdfunding in Africa

3. Cryptocurrencies, Initial Coin Offerings and Access to Finance in Africa

4. Financial Integration With These Recent Financial Developments

5. Conclusion

14. The Potential of FinTech in Enabling Financial Inclusion

1. Introduction

2. The Growth of FinTech and Its Influence on Financial Services

3. Global Efforts to Promote Digital Financial Inclusion

4. The Emergence of FinTech in Africa

5. Challenges in Unlocking the Full Potential of Mobile Technology

6. Looking Ahead

Index

Copyright

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List of contributors

Joshua Yindenaba Abor,     Department of Finance, University of Ghana Business School, Accra, Ghana

Elikplimi Komla Agbloyor,     Department of Finance, University of Ghana Business School, Accra, Ghana

Sydney Chikalipah,     Department of Finance and Tax, University of Cape Town, Cape Town, South Africa

Ashenafi Beyene Fanta,     University of Stellenbosch Business School, Cape Town, South Africa

Kidanemariam Gebregziabher Gebrehiwot,     Department of Economics, Mekelle University, Ethiopia

Haruna Issahaku,     Department of Economics and Entrepreneurship Development, University of Development Students, Ghana

Jammeh Kebba,     Research Department, African Development Bank, Abidjan, Côte d'Ivoire

John Kuada,     Department of Business and Management, Aalborg University, Aalborg, Denmark

Daniel Makina,     Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa

Sheilla Nyasha,     Department of Economics, University of South Africa, Pretoria, South Africa

Nicholas M. Odhiambo,     Department of Economics, University of South Africa, Pretoria, South Africa

Jacob Oduor,     Research Department, African Development Bank, Abidjan, Côte d'Ivoire

Iwa Salami,     Royal Docks School of Business and Law, University of East London, United Kingdom

Christian Tipoy,     Department of Economics, University of KwaZulu-Natal, South Africa

Yabibal M. Walle,     Department of Econometrics, Georg-August-University of Goettingen, Germany

Mulatu F. Zerihun,     Department of Economics, Tshwane University of Technology, Pretoria, South Africa

Section 1

Introduction

Outline

1. An Overview of Financial Services Access and Usage in Africa

1

An Overview of Financial Services Access and Usage in Africa

Daniel Makina     Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa

Abstract

The chapter provides an overview of financial inclusion in Africa as well as brief snapshots of the contents of chapters in the book. This introductory chapter highlights the key issues covered in the book.

Keywords

Bottom of the economic pyramid; Financial inclusion; Global findex; Microfinance

1. Introduction

2. The State of Financial Inclusion at a Glance

3. Africa's Institutional Environment

4. Organization of the Book

4.1 Part II – Evolution of Financial Markets and Institutions

4.2 Part III – Geography of Financial Markets and Institutions

4.3 Part IV – Empirical Evidence Focusing on Africa

4.4 Part V – the Trajectory of Future Developments

References

Further Reading

1. Introduction

The clarion call – finance for all – has likely been around from as far back as when people started using money. In one of its publications, the Consultative Group to Assist the Poor (CGAP, 2006)provides salient historical milestones. Informal savings and credit groups are reported to have operated across the world for centuries. In 1462, towards the end of the Middle Ages, an Italian monk created the first official pawn shop, which did not charge interest in an effort to stem the usurious practices of private moneylenders who lent money at extortionate rates. Predictably, such pawn shops were not sustainable, leading Pope Leon X in 1515 to authorize the charging of interest so that pawn shops could cover their operating costs. Then in the 18th century, an Irish national, Jonathan Swift, established the Irish Loan Funds system, which could be regarded as the first microcredit program, as it disbursed small loans to poor farmers without collateral. In the 19th century, Friedrich Wilhelm Raiffeisen conceived a credit co-operative in Germany, which concept spread rapidly to other European countries and North America, eventually taking root in developing countries during the colonial periods. Between 1950 and 1970, governments took keen interest in expanding access to agricultural credit. To this end, they set up subsidized state-owned development finance institutions that would disburse concessional loans to farmers and small entrepreneurs which proved to be unsustainable once again. In the early 1970s, microcredit programs emerged whereby small loans were extended to groups of poor women, the early pioneers being Grameen Bank in Bangladesh, ACCION International in Latin America and the Self-Employed Women's Association Bank in India.

By the beginning of the 1990s, the term ‘microcredit’ was replaced by the term ‘microfinance’ – the provision of a full set of financial services such as credit, savings, money transfers, insurance and other related services to the poor. Today microfinance is provided not only by specialized institutions but also by a range of providers that includes both financial and non-financial institutions, such as telecommunications companies. The term ‘finance to all’ has now crystallized into the common term ‘financial inclusion’, which the Global Partnership for Financial Inclusion defines as provision of financial services – such as deposit and savings accounts, payment services, loans, and insurance – that are readily available to consumers so that they can actively and effectively use them to meet their specific needs. The role of financial inclusion has since been acknowledged in the goal to achieve the 17 Sustainable Development Goals (SDGs) adopted by the United Nations on 25 September 2015. Though none of the SDGs explicitly target financial inclusion, it is recognized as an enabler for most of them.

2. The State of Financial Inclusion at a Glance

The World Bank Global Findex (2017) estimates that about 1.7   billion adults in the world are unbanked; that is, they are without an account at a financial institution or through a mobile money provider. The majority of these unbanked populations are in the developing world, and about half are concentrated in just seven countries: Bangladesh, China, India, Indonesia, Mexico, Nigeria and Pakistan. There is also a gender dimension to financial exclusion, as 56% of all unbanked adults are women.

Africa is the world’s least banked region, with an estimated 80% of its one billion people lacking access to formal banking services in a world where, on average, 69% of adults have an account. On average, the World Bank estimates that only 24.8% of adults in sub-Saharan Africa have a bank account, and only 14.8% of adults possess a debit card. Compared with other developing regions, these percentages are significantly lower; in Asia, the average percentages of ownership of a bank account and debit card are 53.2% and 32%, respectively; for the MENA region, 47.7% and 36%; for Latin America, 46.7% and 31.2%; and for emerging Europe, 58.1% and 43.2%. The situation also is not good in terms of overall access to banking services, as African countries have only about 7.5 bank branches and 13.3 ATMs per 100,000 people, compared with the global average of 18.9 bank branches and 48.3 ATMs per 100,000 people.

The World Bank considers account ownership a key indicator of financial inclusion, because having an account enables an individual to store money, build savings, make payments, send and receive remittances and access credit. Formal account ownership across African countries in 2017 is depicted in Table 1.1.

The majority of African countries belong to the low-income group and have the lowest level of financial inclusion, with average account ownership of 34%. The lower middle-income group countries have a slightly higher level of financial inclusion with average account ownership of 41%, and the few upper middle income countries – Algeria, Botswana, Gabon, Libya, Mauritius, Namibia and South Africa – have the highest average account ownership at 66%. It would appear that the level of financial inclusion is positively correlated with the level of income – the higher the income, the higher the level of financial inclusion. The gender gap across countries is generally country-specific, and religion seems to have a bearing on women’s financial exclusion. It is more acute in countries with substantial Muslim populations, such as Algeria, Benin, Burkina Faso, Egypt, Mali, Mauritania, Morocco, Nigeria and Tunisia. Poor countries such as Chad, Liberia, Mozambique, Togo and Uganda also have relatively high gender gaps. The gender gap between the rich and poor shows no relationship to the level of financial inclusion, as low-income countries have an average gap of 15%, not very different from that of upper middle-income countries at 14%.

Noteworthy in the account ownership statistics is the influence of mobile money account ownership in elevating the level of financial inclusion in a number of countries. Despite Kenya being in the lower middle-income group, it has now a level of financial inclusion comparable to that of countries in the upper middle income because it has more people with mobile money accounts than those with bank accounts. Three low-income countries in East Africa – Rwanda, Tanzania and Uganda – have account ownership levels similar to those of lower middle-income countries because of their increased levels of mobile money accounts. In West Africa, low-income countries – Burkina Faso, Senegal and Togo – have similarly improved account ownership because of mobile money usage. In Togo, for example, account ownership rose from 18% in 2011 to 45% in 2017 to surpass that of Cote d’Ivoire, a lower middle-income country, because of subscriptions to mobile money. For the West African region as a whole, mobile money usage has resulted in account ownership by individuals almost doubling from 23% in 2011 to 43% in 2017.

Table 1.1

Source: The Global Findex Database, 2017.

Despite gains in financial inclusion since the first World Bank Global Findex survey in 2011, for sub-Saharan Africa the proportion of adults with an account in a financial institution has largely remained stagnant; it is the proportion of adults with a mobile money account, which had nearly doubled to 21% by 2017, that has driven financial inclusion to new heights. This has resulted in eight African countries having 20% or more of adults who only use a mobile money account, namely Burkina Faso, Gabon, Kenya, Senegal, Tanzania, Uganda and Zimbabwe. Notwithstanding this notable progress, Africa still lags behind all other developing regions in terms of financial inclusion.

According to BMI Research (2018), sub-Saharan Africa is the lowest scoring region in its Financial Barriers Index, with a score of 29.2 out 100, compared with Asia (48.7 out of 100), emerging Europe (56.3 out of 100), Latin America (55.7 out of 100) and the Middle East and North Africa (MENA – 40.8 out of 100). While financial barriers are observed to be acute in Central and West Africa, countries such as Botswana, Cote d’Ivoire, Ghana, Kenya, Mauritius, Nigeria, Rwanda and South Africa perform far better than their regional peers do. BMI Research attributes the weak performance of many African states to low levels of financial inclusion, high lending rates, limited financial market efficiency and trustworthiness, and notes that these factors pose significant barriers to inclusive growth and foreign portfolio investment growth.

3. Africa's Institutional Environment

In order to understand why Africa lags behind other developing regions in financial inclusion, one must consider its institutional setting. Much of Africa could be said to be at the bottom of the economic pyramid (BOP). The BOP is a socio-economic concept that endeavours to group the world's poorest, who face a significant number of barriers to opportunity, which include, among others, access to financial services. The concept was popularized by Prahalad (2004), whose vision was to unleash the creative and productive potential of the poor in an inclusive capitalist system. Prahalad focused corporate attention on opportunities at the BOP observing that low-income markets could be best reached through a low-price, low-margin, high-volume model. However, other scholars such as Simanis (2012) noted that the model could only work if two conditions are satisfied: (1) if ‘a company can leverage an existing infrastructure that serves wealthier customers to offer a product or service to poor consumers, and (2) the consumers already know how to buy and use the offering’.

According to the UNDP (2007), BOP economies comprise about four billion people (roughly two-thirds of the world population) who live on less than $1.25   per day. The characteristics of BOP economies include, among others, agrarian orientation, poverty, income inequality, poor education and health services, gender inequality, inadequate hard and soft infrastructure, low per-capita income and underdeveloped financial sectors. These socio-economic conditions arise from institutional voids – that is, ‘where institutional arrangements that support markets are absent, weak, or fail to accomplish the role expected of them’ (Mair & Marti, 2009, p. 419). Accordingly, Khanna, Palepu, and Sinha (2005) observe that these conditions substantially increase operating costs of firms operating at the BOP, which have to work around these institutional voids.

Many African countries have low levels of financial inclusion because they suffer from institutional voids. The growing microfinance sector is a response to fill in the institutional voids in financial services. The concept of microfinance is to reach out to the huge low-income market through provision of tiny loans and other financial services in high volumes so as to make it profitable or sustainable. The same principle is being applied in the provision of mobile money. Enabling mobile phones are filling the institutional void of weak infrastructure that has prevented traditional banks from reaching out to unbanked low-income communities.

4. Organization of the Book

The book is organized in five parts, of which this chapter is Part I – Introduction. Part II – Evolution of Financial Markets and Institutions – comprises chapters exploring the evolution of banks, the causal relationship between financial development and economic growth, and the role of finance in promoting the private sector. Part III – Geography of Financial Markets and Institutions – comprises chapters that scan the landscape of the financial sector in Africa. Part IV – Empirical Evidence Focusing on Africa – comprises chapters that examine empirical evidence on various issues regarding financial inclusion. Part V – The Trajectory of Future Developments – concludes with chapters that look at the trajectory of financial inclusion in Africa.

Snapshots of the contents of the book chapters follow.

4.1. Part II – Evolution of Financial Markets and Institutions

In Chapter 2, Daniel Makina traces the evolution of banks in Africa from pre-colonial to post-colonial periods. Crucially, post-colonial institutions are discussed in the context of differences arising from colonial origins and how they have since evolved in extending financial inclusion.

In Chapter 3, Nicholas Odhiambo, Sheilla Nyasha, Mulatu Zerihun and Christian Tipoy examine the dynamic causal relationship between financial development and economic growth in French- and English-speaking African countries during the 1990–2014 period. They use three macroeconomic proxies of financial development, namely liquid liabilities, deposit money bank assets and bank deposits, to examine this linkage. Their results show that the causality between financial development and economic growth differs significantly between English-speaking and French-speaking countries.

In Chapter 4, Joshua Yindenaba Abor, Haruna Issahaku, Agyapomaa Gyeke-Dako and Elikplimi Komla Agbloyor examine the role of finance in promoting private sector development in Africa, and discuss the constraints to extending financial inclusion. They conclude by advocating innovative funding sources such as remittances, crowdfunding, structured trade finance, private equity and venture capital, green bonds, leasing and factoring, mobile money services, and alternative capital markets for small and medium enterprises.

4.2. Part III – Geography of Financial Markets and Institutions

In Chapter 5, Sydney Chikalipah and Daniel Makina provide an overview of the geography of the financial sector in Africa. The landscape of financial markets and institutions explored includes banking institutions, capital markets, and the pension and insurance sectors. They further explore, in Chapter 6, the landscape of microfinance institutions and the informal finance sector as well as the growing microinsurance and mobile money sectors.

In Chapter 7, Jacob Oduor and Jammeh Kebba discuss the role of regulation and governance in either enhancing or limiting financial inclusion. Additionally, they examine the efficacy of prudential reforms implemented over the years, citing successes, failures, policy recommendations and trajectories for the future.

4.3. Part IV – Empirical Evidence Focusing on Africa

In Chapter 8, Kidanemariam Gebregziabher Gebrehiwot and Daniel Makina examine the macroeconomic determinants of financial inclusion across 27 African countries. Their results show that financial inclusion is significantly and positively related to its lagged value, GDP per capita and mobile infrastructure, and negatively related to government borrowing. The negative relationship between financial inclusion and government borrowing has important policy implications for African countries, which have a low ratio of private sector credit to GDP.

In Chapter 9, Daniel Makina and Yabibal Walle investigate the relationship between financial inclusion and macroeconomic growth in selected African countries against the odds of non-availability of long-dated time series data on indicators of financial inclusion. Despite data constraints, they find that financial inclusion – as measured by the dimension of access – has a significantly positive effect on economic growth in Africa.

In Chapter 10, Ashenafi Beyene Fanta and Daniel Makina investigate the relationship between financial inclusion and technology using cross-sectional data of 168 countries, of which 48 are African. They report a significant positive relationship between financial inclusion and technology proxied by internet and ATM access.

In Chapter 11, Ashenafi Beyene Fanta and Daniel Makina analyse unintended consequences of financial inclusion in the form of over-indebtedness and its links with poverty using FinScope survey data from selected African countries. Their results show that while over-indebtedness can be triggered by cross-borrowing and lack of credit literacy, it can be curbed by increased income and employment. They further find that over-indebtedness is likely to aggravate rather than alleviate poverty.

4.4. Part V – the Trajectory of Future Developments

In Chapter 12, John Kuada discusses the different ways in which financial inclusion can help achieve the UN's 17 SDGs for ending poverty, protecting the planet, and ensuring prosperity for all by 2030. He also provides pointers to some of the challenges that need to be addressed. A key message is that financial inclusion alone may not provide the poorest segments of African populations with the skills and competencies they need to find pathways out of poverty.

In Chapter 13, Iwa Salami observes that some emerging technology-enabled alternative financing approaches have cross-border dimensions. This therefore requires a coordinated approach to regulation, of which a regional regulatory approach is likely to play a prominent role. She discusses the feasibility of such an approach.

In Chapter 14, Daniel Makina examines the manner in which FinTech is breaking the barriers to financial inclusion. He first traces the history of FinTech and its evolution both globally and in Africa. Then he discusses the impact of selected FinTech products in the African context.

References

BMI Research.  Industry trend analysis –Index signals: SSA rising stars for financial sector development . BMI Research; 2018 24 April 2018.

CGAP.  Access for all: Building inclusive financial systems . Washington DC: CGAP; 2006.

Khanna T, Palepu K.G, Sinha J. Strategies that fit emerging markets.  Harvard Business Review . 2005;83:63–74.

Mair J, Marti I. Entrepreneurship in and around institutional voids: A case study from Bangladesh.  Journal of Business Venturing . 2009;55:819–850.

Prahalad C.K.  The fortune at the bottom of the pyramid: Eradicating poverty through profits . Wharton School Publishing; 2004 2004.

Simanis E. Realty check at the bottom of the pyramid. Harvard Business Review; 2012 June 2012 issue. https://hbr.org/2012/06/reality-check-at-the-bottom-of-the-pyramid.

UNDP.  Human development report 2007/2008 . New York: United Nations Development Programme; 2007.

World Bank.  The global findex database: Measuring financial inclusion and the fintech revolution . Washington DC: World Bank; 2017.

Further Reading

CGAP.  Achieving the sustainable development goals: The role of financial inclusion . Washington DC: CGAP; 2016.

Cheston S, Kuhn L. Empowering women through microfinance. In: Daley-Harris S, ed.  Pathways out of poverty: Innovations in microfinance for the poorest families: 167–228 . Bloomfield, CT: Kumarian Press; 2002.

GPFI.  Global standard-setting bodies and financial inclusion for the poor: Toward proportionate standards and guidance . Washington DC: CGAP; 2011.

Varman R, Skalen P, Belk R.W. Conflicts at the bottom of the pyramid: Profitability, poverty alleviation, and neoliberal governmentality.  Journal of Public Policy and Marketing . 2012;31:19–35.

Section 2

Evolution Of Financial Markets And Institutions

Outline

2. How Did Banks Evolve in Africa?

3. Financial Development in Africa: Is It Demand-Following or Supply-Leading?

4. The Role of Financial Markets and Institutions in Private Sector Development in Africa

2

How Did Banks Evolve in Africa?

Daniel Makina     Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa

Abstract

The chapter makes attempts to trace the historical development of financial institutions, and banks in particular. The focus is on how banking systems emerged in Africa. Pre- and post-colonial institutions are explored. Crucially, post-colonial institutions are examined in the context of how they are extending financial inclusion to the bottom pyramid of the economies. Furthermore, differences arising from colonial origins are analysed.

Keywords

Africa; Banking; Colonization; Financial inclusion; Money; ROSCAS

1. Introduction

2. Financial Institutions in Pre-Colonial Africa

3. Colonial Demarcation of Africa and Financial Institutions

3.1 Colonial Demarcation

3.2 Colonial Banks

3.2.1 British Colonial Banks

3.2.2 Continental Colonial Banks

4. Financial Institutions in Post-Colonial Africa

5. Commercial Bank Access Four Decades Post-Colonial

6. Looking Ahead

References

Further Reading

1. Introduction

The contemporary view is that a competitive financial system that intermediates funds from those who save to those who consume and/or invest is the lifeblood of a healthy and vibrant economy. A financial system comprises financial intermediaries (banks, insurance companies and similar institutions) and financial markets (stock and bond markets) that play this intermediation role. When one looks at the proliferation of financial intermediaries and financial markets today, one is tempted to think they have existed from time immemorial. Just like human beings, financial institutions have evolved over time to become what they are today.

In ancient times, before the advent of money, trade among people was conducted through barter deals. A producer of cooking pots, for instance, would sell excess production to another for other goods such as, say, clothes he/she does not produce, and vice versa. The value of exchanged goods or services was determined through negotiation. For instance, by agreement a cooking pot could be exchanged for two pieces of cloth. Assuming ancient people were rational economic agents, value was determined taking account of (a) the effort or labour involved in producing the good or service and (b) the demand and supply of the good or service. However, in the absence of a medium of exchange, during this process the value of a good or service could change depending on what it was exchanged for. The cooking pot could be exchanged for one chicken, but this would not mean that the chicken is also worth two pieces of cloth. The chicken exchanged for one cooking pot could be worth three pieces of cloth in another exchange. In other words, there was no measure of value. Hence, the value of exchanged goods or services could be distorted because a barter exchange could only be possible when there was a ‘double coincidence of wants’ between two parties. Some other obvious limitations of barter trade include indivisibility of some goods, lack of standard for deferred payments and problems in storing wealth.

According to Adam Smith in his Wealth of Nations, the limitations of barter trade gave rise to money as a medium of exchange but did not eradicate the practice of barter trade. Davies (2002, p. 28) provides an all-embracing definition of money as ‘anything that is widely used for making payments and accounting for debts and credits’. Thus it can be anything, but money is best defined by its functions as a unit of account, medium of exchange, means of payment, standard for deferred payments and store of value.

From ancient literature we are told that the concept and system of banking preceded that of money. Recorded history shows that the concept of banking originated in Ancient Mesopotamia. ¹ During those times, royal palaces and temples were used as warehouses for grain and